Why Is Agilent (A) Up 5.3% Since Last Earnings Report?

It has been about a month since the last earnings report for Agilent Technologies (NYSE:A). Shares have added about 5.3% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Agilent due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Agilent Surpasses Earnings and Revenue Estimates in Q1

Agilent Technologies’ fiscal first-quarter 2019 earnings of 76 cents per share surpassed the Zacks Consensus Estimate by 3 cents. The bottom line also increased 15.2% year over year.

Fiscal first-quarter 2019 revenues of $1.28 billion increased 6% year over year. The reported revenues were within management’s guided range of $1.265-$1.280 billion and also outpaced the Zacks Consensus Estimate of $1.271 billion.

The year-over-year revenue growth was supported by notable improvement across all its product lines and regions.

Revenues by Segment

Agilent has three reporting segments — Life Sciences & Applied Markets Group (LSAG), Agilent Cross Lab Group (ACG), and Diagnostics and Genomics Group (DGG).

In the reported quarter, LSAG was the largest contributor to total revenues. The segment accounted for $607 million or 47% of the total revenues, reflecting an increase of 2% from the prior-year quarter. This was driven by strength across all major end markets, platforms and regions.

Revenues from ACG came in at $442 million or 34% of its total revenues, reflecting an increase of 8% year over year. Both services and consumables recorded growth across all geographical regions.

Revenues from DGG came in at $235 million, accounting for the remaining 19% of the total revenues. The segment was up 13% from the year-ago quarter, led by growth in pharma, along with strength in clinical and diagnostics end markets.

Operating Results

Gross margin in the quarter was 55.1%, down 20 basis points (bps) year over year. The decrease was due to an unfavorable product mix.

Operating expenses (research &development as well as selling, general & administrative) were $457 million, 3.6% higher than the year-ago quarter.

As a result, adjusted operating margin was 19.5%, up 60 bps year over year.

Balance Sheet

At the end of the fiscal first quarter, inventories totaled $653 million, reflecting an increase from $638 million in the prior-year period. Agilent’s long-term debt was $1.8 billion at the end of the quarter. Cash and cash equivalents were $2.1 billion compared with $2.2 billion in fiscal fourth-quarter 2018.

In the reported quarter, the company paid $52 million in dividends.

Guidance

Agilent provided guidance for fiscal second quarter and raised the same for fiscal 2019.

The company expects revenues between $1.255 billion and $1.270 billion, and earnings per share in the range of 70-72 cents for the fiscal second quarter.

For fiscal 2019, Agilent now projects revenues in the range of $5.15-$5.19 billion versus previous guidance of $5.13-$5.17 billion. Non-GAAP earnings are expected within $3.03-$3.07 versus previous guided range of $3-$3.05 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Agilent has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Agilent has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.